According to the report, digital badges are "credentials that represent skills, interests, and achievements earned by an individual through specific projects, programs, courses, and other activities." They provide a digital hyperlink to information about the badge's associated skills and the projects or tasks the badge holder has completed to earn it.

“Digital badges are making anytime, anywhere learning a reality for learners of all ages who want to pursue their interests with tangible results in real time,” said Bob Wise, president of the Alliance for Excellent Education and former governor of West Virginia, in a prepared statement. “Badges bridge the divide between formal and informal education, and they have the power to transform competency-based learning and hiring practices.”

The report describes three key components of the digital badge "ecosystem":

Badge issuers, which are individuals, schools, employers, institutions, communities, or groups that create credentials to demonstrate mastery of skills and achievements;

Badge earners, who are individuals who want to demonstrate their achievements to various audiences; and

Badge consumers, which are education providers, individuals, employers, communities, or other groups that are looking for people who possess the skills or achievements symbolized by a badge.

The report argues that to be credible, digital badges must include information about when and how they were earned and who issued them, that they should be stackable to demonstrate multiple achievements, and that earners should be free to share them with a variety of audiences. The report goes on to argue that an open badge standard ensures digital badges meet these criteria, and the Mozilla Foundation has already created such a standard, called "Open Badges."

“Open Badges can connect learners to better jobs and opportunities, allowing them to increase skill sets and marketability," said Erin Knight, senior director of learning and badges at Mozilla, in a prepared statement. "In return, employers can look beyond abstract credentials or self-reported resumes and get credible information on candidates — finding a better match, and unlocking a better future for all involved.”

According to the report, some schools have already started using digital badges to connect in-school and out-of-school learning and to promote more innovative, engaged learning.